Cosco to buy OOIL for US$6.3bn

Photo: Creative Commons / Theurbanhistorian

Chinese container shipping giant Cosco will buy competitor Orient Overseas International Limited, for US$6.3 billion (A$8.3 billion), the latest in a series of major consolidation moves within the global shipping sector.

OOIL’s container shipping subsidiary, OOCL, has roughly 2.7% of the global market, meaning – according to Reuters – 63% of the global container market is now controlled by the top six shipping lines.

The deal means Cosco will have a fleet of over 400 vessels, and capacity to handle as much as 2.9 million twenty-foot equivalent units (TEUs) of containers at any one time, making the Chinese firm the third-largest container shipper after Denmark’s Maersk, and Switzerland’s Mediterranean Shipping Company (MSC).

“Post-closing, the combined Cosco Shipping Lines and OOCL will become one of the world’s leading container shipping companies,” Cosco said in a statement.

“The outstanding management system and service capabilities, as well as established global shipping network, of Cosco Shipping Lines and OOCL, can provide customers of both [companies] with more diversified product offerings and better service experience.”

The offer was made based on a price of HK$78.67 per Orient Overseas share, a 31% premium on the company’s closing price on Friday last week.

The deal will still need to face scrutiny from global regulators, with that process expected to take around six months.

Basil Karatzas, chief executive of New York’s Karatzas Marine Advisors, was quoted in The Australian this week saying the deal was a major one for Cosco in the US market, especially.

“With the acquisition, Cosco effectively doubles its share in the US market, which puts it at par with the other big players,” Karatzas was quoted as saying.

“It took Maersk decades to develop this market, but with the Orient Overseas deal, Cosco did it overnight.”